Toward a Broader Conception of Adverse Selection

• Adverse selection isn't just for financial markets—it shows up everywhere from restaurant choices to parking spots to MoviePass subscriptions
• The availability of an option is itself information: empty restaurants, open parking spots, and unfilled subway cars are empty for a reason
• In auctions and trading, winning means you outbid everyone else, which should make you update that you probably overpaid (the winner's curse)
• MoviePass failed because it didn't account for adverse selection in its customer base—people who buy unlimited movie passes are selected for watching lots of movies
• The key mental shift: stop asking "is this good?" and start asking "why is this available to me when others passed on it?"

The author argues that adverse selection—traditionally understood as a financial markets phenomenon where information asymmetries make trading dangerous—actually pervades everyday decision-making. The central thesis is that "conditional on getting to trade, your trade wasn't all that great." Whenever you get to do something, you should ask what others know that you don't, because the opportunity itself is evidence that people with more information chose not to take it.

The piece builds this argument through a progression of examples. Simple cases like choosing between restaurants (the one with open tables is probably worse) and finding parking spots (if it's suspiciously available in NYC, there's probably a reason) establish the pattern. More complex examples follow: Thanksgiving leftovers and Laffy Taffy bowls demonstrate how selection processes leave you with the worst options. MoviePass's business failure illustrates how companies lose money when they don't account for adverse selection in their customer base—people who buy unlimited movie passes are selected for watching many movies, not average moviegoers. The auction examples introduce the winner's curse: if you won the bid, you probably overbid, because winning means you were at the extreme tail of all estimates.

The practical implication is a mental model shift. Instead of modeling the world as providing random samples, you need to condition on the selection process that made options available to you. In trading, this means only sending orders you'd be happy with conditional on getting filled—because getting filled is evidence that someone with different information thought it was profitable to trade against you. In everyday life, it means being suspicious of availability itself and actively investigating why options remain open before taking them.